The rising cost of patented medicines is an important topic in the United States and Canada. In the U.S., the White House is promising to support a bipartisan bill in Congress that would force drug-makers to pay rebates as compensation for excessive pricing. In Canada, drug pricing rules were released in August that promise to stamp out excessive pricing and make patented medicines more affordable.
U.S. Drug Pricing Legislation
In the U.S., two competing bills promise to limit how much taxpayers are charged for prescription drugs.
The Lower Drug Costs Now Act of 2019, supported by House Speaker Nancy Pelosi, would give Medicare the authority to bargain with pharmaceutical companies over the cost of drugs, similar to the powers of the Patented Medicines Prices Review Board (“PMPRB”, the “Board”) in Canada. Under the proposed law, Medicare would be required to negotiate maximum prices for insulin products and at least 25 single source brand name drugs that do not have generic competition. Medicare would be required to negotiate prices that do not exceed 120% of the average price in 6 comparator countries, including Canada. Private insurance providers would also benefit from the negotiated prices, unless the insurer opts out.
Opposition to that plan has led to a bipartisan bill that merely gives Medicare the power to prevent above-inflation price hikes but provides no negotiating powers. The Prescription Drug Pricing Reduction Act (PDPRA) of 2019, sponsored by Senators Chuck Grassley and Ron Wyden, would force drug manufacturers to pay rebates for cost increases above the inflation rate. The bill would have no effect on the high launch prices of new drugs, only subsequent price rises. Although initially shot down in the Republican-led Senate, the bill recently received support from the White House.
Changes to Canada’s Patented Medicines Regulations
Drug price regulations in Canada have not changed in more than two decades, despite major developments in the pharmaceutical market. Canadians are currently paying some of the highest patented medicine prices in the developed world, which negatively impacts patients and Canada’s health care system. Recently however, the federal government changed the way it will evaluate new drug prices—a strategy they allege will save Canadians $13.2 billion over 10 years on patented drug costs.
Changes to the Patent Medicines Regulations, which come into force on 1 July 2020, will make prescription drugs more accessible and affordable for Canadians. Prior to the amendments, Canadians were paying almost 25 percent more than the average price that consumers in other developed countries pay for the same drugs.
The amendments will enable the PMPRB to better shield Canadians from overpaying for patented medicines by providing them with new regulatory tools and information.
The new tools and information available to PMPRB include an updated list of countries to compare prices against that includes countries with similar consumer protection measures, economic standing and pharmaceutical markets as Canada. Under the new regulations, the Board will no longer compare prices with the United States and Switzerland, which have some of the world’s highest drug prices. France, Germany, Italy, Sweden, and the United Kingdom remain on the list of eligible comparators, with the addition of Australia, Belgium, Japan, the Netherlands, Norway, and Spain.
These newly available resources promise to provide the PMPRB with the actual market price of medicines in Canada, rather than the inflated list or “sticker” prices set out by pharmaceutical companies. This will ensure accurate assessment by the Board when determining whether a price is reasonable. If the PMPRB determines that a patented medicine is priced excessively, it can order the patent holder to reduce the price at which the medicine is sold and to offset the amount of excess revenues it has received.
Pushback from the Pharmaceutical Industry
In Canada, the final amendments were met with strong opposition from the pharmaceutical industry. Two days after the changes were announced, a group of several prominent pharmaceutical innovators, including Merck, Janssen, and Bayer, filed a constitutional challenge to the new legislation. The companies allege that the federal government is acting ultra vires, or outside the scope of its authority. Healthcare is a provincially mandated issue, the lawsuit alleges, and therefore the pharmaceutical companies argue that the proposed legislation is unconstitutional. The group also claims that the legislation will negatively impact drug research in Canada and limit Canadians’ access to new, lifesaving medications.
In the US, the Pharmaceutical Industry Labor-Management Association warns that the proposed legislation would have a “devasting impact on the economy” and “drastically chill the research and development of new lifesaving medicines.” This remains to be determined.
Companies seeking patent protection on medicines in the U.S. and Canada ought to be prepared for potential regulatory changes. The PMPRB’s role is to review and control the price of patented medicines.
If you’re looking to establish IP assets for a pharmaceutical product, consult an IP professional to ensure that you’re meeting federal regulations, including the PMPRB’s rules, and that you’re adopting adequate protection on your assets. Depending on the circumstances, it may be strategically advisable to begin discussions with the PMPRB before a patent is granted.